DOJ’s ‘Carrot and Stick’ Approach to FCPA Compliance
This week, DOJ provided more guidance on what it expects from companies that hope for favorable treatment based on effective compliance programs.
The memorandum from DOJ’s Fraud Section explains the criteria that will be used when evaluating requests for mitigation from companies that voluntarily disclose FCPA violations. In addition to disclosing all relevant facts and providing cooperation, companies will be required to carry out “timely and appropriate remediation” including the implementation of effective compliance and ethics programs.
The memorandum clarifies that, while compliance programs should be tailored to each company’s situation, programs that warrant mitigation “will include” certain attributes. Many of the listed attributes reiterate previous guidance from DOJ and SEC, including adequate resourcing, risk-focused policies and procedures, training and awareness for employees, and effective reporting and auditing mechanisms.
However, new emphasis is placed on increasing the stature of compliance organizations within companies. The memorandum indicates that “the quality and experience of the compliance personnel” should enable them to “understand and identify the transactions identified as posing a potential risk.” Simply designating existing staff as “compliance” personnel may not be credited by DOJ if those employees do not have sufficient expertise. Nor should compliance staff be placed under the authority of business or sales managers who might have different objectives. The memorandum refers to the “independence of the compliance function” as a key factor.
The memorandum also introduces a new criterion of “how a company’s compliance personnel are compensated and promoted compared to other employees.” Retaining highly-paid and high-ranking compliance professionals not only provides expertise and experience, but also sends a message that compliance is a top priority. This contributes to what the memorandum calls a “culture of compliance.”
The “carrot” of potential mitigation also comes with a “stick”: The memorandum notes that the Fraud Section recently increased its FCPA unit by more than 50% to “send a message to wrongdoers that FCPA violations that might have gone uncovered in the past are now more likely to come to light.” Companies should therefore continue to regularly evaluate and update their anti-corruption compliance programs in light of this new guidance. Arent Fox LLP has significant experience helping to design and update state-of-the-art, risk-based compliance programs.